Southern Pacific Personal Loans Ltd v Walker
| Jurisdiction | England & Wales |
| Judge | LORD CLARKE |
| Judgment Date | 07 July 2010 |
| Neutral Citation | [2010] UKSC 32 |
| Date | 07 July 2010 |
| Court | Supreme Court |
[2010] UKSC 32
Lord Hope, Deputy President
Lord Walker
Lord Brown
Lord Mance
Lord Clarke
and another
Appellant
Richard Mawrey QC
Adrian Salter
Matthew Richardson
(Instructed by Turner Coulston)
Respondent
Nicholas Elliott QC
William Edwards
(Instructed by Rosling King LLP)
LORD CLARKE (delivering the judgment of the court)
Introduction
The appeal arises in another case which involves the meaning of 'credit', the 'amount of credit' and the 'charge for credit' in the Consumer Credit Act 1974 ('the Act'). The case for the appellant borrowers is that the respondent lender failed correctly to state the 'amount of credit' in the loan agreement. If that case is accepted, it follows that the loan agreement is wholly unenforceable under the Act. This point was not taken before District Judge Gilham, who made a suspended order for possession on terms that the borrowers made the payments as and when due and paid off what were substantial arrears by monthly instalments. The borrowers appealed to the Circuit Judge and were permitted to take the point that the agreement was unenforceable. They succeeded before His Honour Judge Halbert on 27 April 2009, with the result that he ordered the discharge of the charge registered on the property. However, the Court of Appeal allowed the lender's appeal on 12 November 2009. This appeal by the borrowers is brought with the permission of the Supreme Court.
The agreement
The borrowers are Mr and Mrs Walker. They completed an application form for a loan from the lender, Southern Pacific Personal Loans Limited ('SPPL'). The respondent is the successor in title to SPPL. The parties signed a credit agreement which it is common ground is regulated by the Act. On the front the agreement contains a number of boxes under the heading 'FINANCIAL MATTERS', some 'NOTES' in smaller but legible print, some warnings in capital letters and the parties' signatures. The borrowers signed it on 26 March 2005 and SPPL signed it on 20 April 2005. On the reverse there appear 46 'LENDING CONDITIONS' and some definitions.
The boxes are set out in this way:
The NOTES make it clear that all the terms, including the LENDING CONDITIONS, form part of the agreement, and also include this:
" Payments You must repay the Amount of Credit together with any amounts financed under this Agreement with interest by making the Monthly Payments…."
Clause 15 of the LENDING CONDITIONS provides:
"We will charge interest on the money you owe us (which includes the Loan, interest and Expenses) at the Interest Rate. …"
The issue
The issue in this appeal is whether the 'Amount of Credit' is incorrectly stated in box C. The borrowers' case is that the true amount of credit was not £17,500 as stated in box C but £18,375, which is the amount stated in box E, where it is described as 'Total Amount Financed'. It is common ground that the amount of £875, which is described in box D as the 'Broker Administration Fee' was advanced to the borrowers and that interest was payable on it at the same rate as on the sum of £17,500. Thus the Total Amount Financed is shown as £17,500 plus £875, namely £18,375, and interest is shown to be payable at 13.98 per cent per annum on that total figure. It is submitted on behalf of the borrowers that it follows from the fact that the total amount of the loan was £18,375 that the 'Amount of Credit' was £18,375. It is said that, applying the principle of 'truth in lending', it is wrong to describe the 'Amount of Credit' as only £17,500 because SPPL lent the borrowers the total sum of £18,375 and charged interest on that total.
So expressed, that submission seems to us to have some attraction. However, it was rejected by the Court of Appeal in an admirably succinct judgment given by Mummery LJ, with whom Sullivan LJ and Owen J agreed. The issue is whether the Court of Appeal was correct. All depends upon the true construction of section 9 of the Act.
The Act and the Regulations
By section 8(2) of the Act, as amended as at the relevant time, a consumer credit agreement is a personal credit agreement by which the creditor provides the debtor with credit not exceeding £25,000.
Sections 9 and 20 of the Act provide, so far as relevant, as follows:
"9 Meaning of Credit
(1) In this Act 'credit' includes a cash loan, and any other form of financial accommodation.
(4) For the purposes of this Act, an item entering into the total charge for credit shall not be treated as credit even though time is allowed for its payment.
20 Total charge for credit
(1) The Secretary of State shall make provisions containing such regulations as appear to him to be appropriate for determining the true cost to the debtor of the credit provided or to be provided under an actual or prospective consumer credit agreement (the 'total charge for credit'), and regulations so made shall prescribe –
(a) what items are to be treated as entering into the total charge for credit, and how their amount is to be ascertained;
(b) the method of calculating the rate of the total charge for credit."
By section 189, unless the context otherwise requires, 'credit' is to be construed in accordance with section 9.
The relevant regulations under the Act were the Consumer Credit (Total Charge for Credit) Regulations 1980 ('the TCC Regulations') and the Consumer Credit (Agreements) Regulations 1983 ('the Agreements Regulations'). We will refer to them together as 'the Regulations'. They have been amended over time, both before and after the agreement. For present purposes both the Act and the Regulations in the form in which they were in April 2005 apply.
The TCC Regulations were made under section 20 of the Act. Regulation 4 of them is entitled "Items included in total charge for credit" and provides, so far as relevant:
"Except as provided by regulation 5 below, the amounts of the following charges are included in the total charge for credit in relation to an agreement:
(a) the total of the interest on the credit which may be provided under the agreement;
(b) other charges at any time payable under the transaction by or on behalf of the debtor or a relative of his whether to the creditor or any other person."
Section 60 of the Act requires the Secretary of State to "make regulations as to the form and content of documents embodying regulated agreements". He made the Agreements Regulations under that section. Section 61(1)(a) of the Act provides that, among other things, a regulated agreement is not properly executed unless a document containing "all the prescribed terms" is signed by the debtor.
The Act and the Regulations distinguish between 'prescribed terms' and 'required terms'. In the case of an agreement predating 6 April 2007 such as the agreement which is the subject of this appeal, by section 127(3) of the Act a failure properly to include a prescribed term in the agreement renders the agreement wholly unenforceable, whereas a failure properly to include a required term merely means that the agreement is enforceable only by court order under section 65(1) of the Act. In the case of the agreement in this case, the prescribed terms were: a term stating the amount of credit (Agreements Regulations reg 6(1) and Sch 6, para 2), a term stating the rate of any interest on the credit to be provided under the agreement (ibid Sch 6, para 4) and a term stating how the debtor is to discharge his obligations under the agreement to make the repayments (ibid Sch 6, para 5).
In the instant case it is common ground that, if the agreement contains a term correctly 'stating the amount of the credit', it complies with Schedule 6, para 2 of the Agreements Regulations and is enforceable, whereas if it does not, it is irredeemably unenforceable.
Discussion
But for the provisions of section 9 of the Act, there would be a strong case for saying...
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